Turnaround Allows Lender to Amend Loan
94M
Annual Sales
31M
in Debt
ETX, Alma Michigan
Challenge
Automotive aftermarket transmissions and torque converters. $94 million. $31 million debt. Private Equity ownership.
- Contracts lost due to lack of focus on sales in traditionally stable businesses led to systemic underperformance on bottom line.
- Management could not cut cost fast enough to maintain liquidity.
- Company modestly leveraged, but working capital was scarce in an inventory intense business.
- Three divisions were draining cash from one good division.
Solution
- MorrisAnderson engaged by Private Equity firm to assess the viability of the business and determine options to create value.
- MorrisAnderson developed a multi-stage process to overhaul the company:
- Sell off unprofitable transmission rebuilding facility.
- Consolidate transmission facility into the contract manufacturing facility where there was excess space.
- Make overhead cuts and consolidate Texas location.
- Reduce unprofitable retail locations for the vertically integrated torque converter division.
Results
- Company realized $3.2 million in cost cuts.
- Working capital was improved by $5 million through the sale of the unprofitable division.
- Private Equity sponsor contributed $1 million to satisfy lender request.
- Lender renewed its relationship with the restructured company.
